Sage approach to circling sharks Mark Hawthorne December 16, 2008
CAPE Lambert Iron Ore chairman Tony Sage has successfully fought off the "sharks" circling his company, and is running the rule over the distressed assets of miners OZ Minerals and CopperCo.
It has been a remarkable comeback from Sage, who looked like being booted off the board of Cape Lambert just two months ago — not too many mining bosses have survived the takeover advances of Roman Abramovich and Mick Shemesian and lived to fight another day.
"Each day it seems like a new shark starts circling Cape Lambert," Sage said. "We've beaten a few off, but the best way to stop the sharks from circling is to spend the cash we've got, and that's what we're going to do. The point is, there are a lot of very good projects on offer right now, and we're going to assess each one of them. We're not going to spend rashly, we're going to spend our money on good assets."
Cape Lambert has more than $250 million of cash remaining in the company coffers after selling its flagship iron ore assets to China Metallurgical at the top of the market. With that in mind, mining brokers have been buzzing around Sage's office daily.
Sage held discussions on Friday with brokers "touting assets from OZ Minerals" that are up for sale.
"You know what brokers are like," Sage told Full Disclosure. "They come to you saying they have a deal, but until the boards of the companies actually speak, who knows. I will say it's a good time to be cashed up. We don't have to go anywhere, the offers are coming to us in Perth.
"I can also confirm that one or two of the OZ Mins projects look interesting to us, but it's early stages. We are doing our due diligence, and there has been no discussion at board level yet."
OZ Minerals, which has burned through about $150 million of cash in just a week, now has less than $280 million of cash at the bank. Its debt is more than $1 billion and the company, which is suspended from trading, would have difficulty getting money through a capital raising.
Sage has ruled out taking an interest in OZ Minerals' undeveloped but promising Martabe gold and silver project in Indonesia — "as a company we've never done business in Indonesia, so it's not in our comfort zone" — but says some other assets are of interest.
"We would be interested in purchases that are in Australia and already producing," Sage said.
That puts the Golden Grove polymetallic mine in WA and the Rosebery polymetallic mine in Tasmania in the picture. A recent Credit Suisse report valued Golden Grove at $73 million and Rosebery at $153 million.
As a result of its financial woes, OZ Minerals has deferred a $125 million renewal of the facility at Rosebery. Development of the open pit copper prospect at Golden Grove has also been put on hold, saving OZ Minerals about $20 million.
Cape Lambert, which has committed $100 million to a project in Sierra Leone, has another $250 million to spend and would be able to buy and develop either of those assets. "I know OZ Mins has plenty of good assets. As I said, it's a good time to be cashed up."
Sage said he had also had inquiries from Ferrier Hodgson, the receiver of fallen Queensland miner CopperCo, about the company's assets.
CopperCo, which operates the Lady Annie copper mine, went into receivership after failing to refinance $45 million owed to Macquarie Bank.
Full Disclosure notes that, in the past six months, analysts from Citi, Fat Prophets and DJ Carmichael have all recommended CopperCo as a "buy".
"Depending on what happens with the debt, it's also in play,"
Sage said. "We have increased the team of analysts here looking at deals from two to eight people, simply because there are so many offers on the table." Those deals include several with mining explorers that are desperate for cash to keep their projects afloat.
On that front, Cape Lambert plans to issue "several" companies with convertible notes, at about 12 per cent interest. "The hold will be their assets," Sage said. "If they default, then the assets will fall to us."
OZL Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
